So Many Customers, So Little Time...

IBM, Red Hat, SuSE Chasing After Different Verticals

July 17, 2003

By
Jacqueline Emigh

Linux vendors are targeting verticals big time, but mainly in a selective way. IBM, Red Hat, and SuSE Linux, for example, are all pouring energies into the financial services and government markets. Retail is also gaining attention, along with verticals ranging from telco to media and entertainment.

After first pursuing financial services, Red Hat will now start to expand into the government space. The telco and media/entertainment markets will be next for Red Hat, in that order, said Kevin Thompson, Red Hat's executive VP and CFO.

Finance and government are both "early adopters of new technologies," Thompson noted. Thompson also pointed to the strong "referenceability"--or word-of-mouth power--inside the finance industry as one key reason for going after finance first.

As far back as May of 2002, Red Hat CTO Michael Tiemann maintained that Red Hat already held technology and service relationships with eight of the top ten financial service firms. Meanwhile, Morgan Stanley, one major Red Hat customer, has committed to Linux as a "large component" of its five-year computing strategy.

Thompson agrees with IBM and SuSE officials that cost savings from Linux will hold strong appeal to government, too. "Microsoft customers face a much higher cost of ownership," he observed, during a recent interview with LinuxPlanet.

Yet for Red Hat, unlike other players, retail is not among the targeted verticals, at this point. "Third-party applications for retail aren't really there yet for Linux," contended the Red Hat CFO. "Retail POS, though, represents a huge opportunity for the future."
IBM, on the other hand, is already targeting retail, along with government and a string of other verticals. Cost savings and "reliability" are big drivers for Linux in most markets, according to Scott Handy, director of Worldwide Linux Solutions Marketing for the IBM Software Group. "Linux can be run on much less beefy servers."

"Linux gives government a level playing field," Handy argued, during another interview with LinuxPlanet. "Also, the fact that Linux is open source gives the assurance that there's no bad code."

Microsoft, he noted, is now trying to fend off Linux with a "code sharing" program for government users. Under Microsoft's Government Security Program (GSP), launched in January, government customers are visiting Microsoft's headquarters in Redmond, Washington to take a look at Windows source code development.

"Microsoft's code sharing program, however, is simply 'look but don't touch,'" according to Handy.

Meanwhile, for its part, SuSE is concentrating on these four verticals: financial, telco, retail and government. "We are addressing them all at once," said Holger Dyroff, SuSE's director of sales for North America.

Financial, telco, and retail firms want to use Linux for "build a competitive edge" through cost savings, according to Dyroff. "We're still experiencing some problems, though, with ISV support," he conceded. SuSE's customers in financial services range from GuideOne Insurance in the US to Koelner Bank eG in Germany and Banco do Brasil. In retail, Boscov's is a big US customer for SuSE and IBM alike.

Dyroff concurred with Handy that open source development is a major drawing card for government. Both pointed to the City of Munich, Germany, as an example of a large-scale government implementation. Munich expects to deploy Linux to 14,000 desktops.

Government, however, is characterized by a long sales cycle, added Dyroff, predicting that it will take some time for Linux to get entrenched.

For the most part, SuSE's government customers in the US are still implementing Linux only on a "project-oriented basis," for file, print, and database applications. "We're also looking at opportunities with SAP applications," according to Dyroff.

SuSE also has some manufacturing customers--such as Caterpillar, for example--but manufacturing isn't a part of SuSE's vertical strategy at this time. "Manufacturing is a totally different thing. It has its own set of ISVs," Dyroff explained.